‘Persistent and systemic challenges’ undermine IBC’s full potential: Parliamentary committee

admin — Tue, 02 Dec 2025 10:15:00 +0000

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The Insolvency and Bankruptcy Code (IBC) has so far played a significant role in enhancing India’s ease of doing business, but despite its successes, there are “persistent and systemic challenges” that undermine its optimal performance, the Parliamentary Standing Committee on Finance has said.

In its ‘Review of Working of Insolvency and Bankruptcy Code and Emerging Issues’ report submitted to Parliament on Tuesday, the Standing Committee on Finance said that the efficacy of the IBC can be seen in the fact that a total of 1,194 companies have been successfully resolved under the its framework.

It added that creditors have recovered over 170% of the liquidation value and more than 93% of the fair value of these companies.

“Despite these undeniable successes, the Committee express profound concern over persistent and systemic challenges that significantly undermine the Code’s optimal performance,” the report said.

Slow processes

“These challenges include protracted delays in proceedings, an excessive burden of litigation straining adjudicating authorities, contentious issues surrounding excessive haircuts for creditors, and the incomplete implementation of key frameworks, specifically the individual insolvency framework and the pre-packaged mechanism for MSMEs,” it added.

The report further said that the Committee particularly took note of the fact that the slow admission of insolvency applications continues to impede rapid value realisation and leads to the deterioration of assets, and also significantly leads to delays in resolution.

The Committee did note that a lot of the shortcomings of the IBC process have been sought to be addressed in the government’s Insolvency and Bankruptcy Code (Amendment) Bill 2025.

However, it also highlighted that the average time taken for the closure of the Corporate Insolvency Resolution Process (CIRP) is currently 713 days, as compared to the mandated 330-day timeline.

How to reduce delays

“The Committee observe that these excessive delays are primarily caused by a severe shortage of NCLT benches, vacant judicial and administrative staff positions, and widespread frivolous litigation and appeals by promoters or unsuccessful resolution applicants, which erodes asset value,” the report said.

Towards addressing this, the Committee recommended that the government’s proposal to set up additional National Company Law Tribunal benches be expedited and that the Ministry of Corporate Affairs accelerate the operationalisation of the proposed Integrated Technology Platform (iPIE) for centralised case management.

“To deter vexatious challenges, the Committee further recommend that the IBBI [Insolvency and Bankruptcy Board of India] prescribe a mandatory upfront threshold deposit for unsuccessful resolution applicants filing appeals, and the minimum penalty for frivolous applications should be substantially raised,” the report said.

Low recovery

The Committee made note of the fact that, while creditors recover about 170% of the liquidation value of the stressed assets, the overall recovery is 32.8% of the total admitted claims, “indicating a significant shortfall largely due to firms entering the IBC when assets are already heavily stressed”.

It said that the recovery is constrained due to the valuation of assets based on their liquidation potential rather than their enterprise value, and by a limited pool of quality resolution applicants. It added that valuation is a concern due to the “lack of transparency and accountability in the process”.

Published – December 02, 2025 03:45 pm IST

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NCLT directs to initiate insolvency proceedings against Syska LED Lights

admin — Wed, 09 Oct 2024 07:13:57 +0000

The Mumbai bench of NCLT has appointed Debashis Nanda as the interim resolution professional suspending the board of Syska LED Lights, as per the provisions of the Insolvency & Bankruptcy Code (IBC).
| Photo Credit: Getty Images/iStockphoto

The National Company Law Tribunal (NCLT) has been directed to initiate insolvency proceedings against Syska LED Lights, admitting the plea filed by its operational creditor — Sunstar Industries.

Syska LED Lights, part of Pune-based SSK Group, operates in segments such as LED lights, personal care appliances, mobile accessories, home appliances, and smart watches.

The Mumbai bench of NCLT admitted the plea filed by Sunstar Industries, claiming total dues of ₹7.70 crore and has appointed Debashis Nanda as the interim resolution professional suspending the board of Syska LED Lights, as per the provisions of the Insolvency & Bankruptcy Code (IBC).

It rejected Syska LED Lights’ claims of a pre-existing dispute and said the email exchanged between parties establishes its liability towards its operational creditor.

“We are of the considered view that the applicant has been able to establish the existence of operational debt and its default on the part of the corporate debtor and further that the application has been filed within the period of limitation and also that there is no pre-existing dispute between the parties with regard to the transaction in question.

“Accordingly, we hold that it is a fit case for admission under Section 9 of the Code,” said a two-member bench in its order passed on Tuesday (October 8, 2024).

Earlier, NCLT also directed the initiating of the Corporate Insolvency Resolution Process (CIRP) against Syska LED Light on a petition filed by some other operational creditor. However, the CIRP was withdrawn in May 2024 after a settlement was reached.

Now, again, Syska LED Light is back to the rigours of CIRP over a petition filed by Sunstar Industries, which manufactures, designs, and fabricates electrical home appliances.

It was supplying irons on a 60-day credit period to Syska, which the SSK Group firm was selling under its own brand name.

Initially, the payment terms were duly adhered to by Syska LED Lights; however, it committed substantial default. According to the operational creditor, it defaulted on 25 invoices raised between March 2023 and July 2023.

This debt was even acknowledged on multiple occasions by the corporate debtor Syska by way of multiple emails and post-dated cheques, Sunstar Industries had claimed.

However, this was opposed by Syska during the proceedings, contending that the petition is based on falsehoods, deliberate misstatements and suppression of material facts.

It further argued that there is a pre-existing dispute between the parties with regard to the quality of the goods supplied by Sunstar Industries and the alleged misuse of IBC as a recovery mechanism and requested to dismiss the petition.

Syska also submitted that an OTS (one-time settlement) proposal was made to the applicant on August 25, 2024, which was not accepted as it was not willing to forgo the interest part of the claim.

However, a two-member NCLT bench comprising Anil Raj Chellan and Kuldip Kumar Kareer rejected Syska’s submission and said it is not disputed that Sunstar Industries has supplied goods worth ₹7.19 crore and Syska LED Lights has acknowledged its liability in an email dated November 22, 2023.

“Merely because the applicant refused to accept the OTS proposal put forth by the corporate debtor cannot be a ground to reject the application under Section 9,” said NCLT.

It further added that, if Sunstar Industries had initiated some proceedings under the Micro, Small and Medium Enterprises Development Act, 2006 for the recovery of the outstanding dues, “it does not debar the applicant” in any way from the filing the application under Section 9 of the IB Code, 2016.

“The Company Petition… is hereby admitted,” said NCLT while directing to put Syska LED Lights under the protection of moratorium under the provisions of IBC.

The 14-page NCLT order also said the supply of essential goods or services to Syska LED Lights, if continuing, shall not be terminated, suspended or interrupted during the moratorium period.

“During the CIRP period, the management of the corporate debtor (Syska) will vest in the IRP/RP. The suspended directors and employees of the corporate debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP/RP,” said NCLT.